Understanding Wage Inequality - Trade, Technology, and Location

This paper investigates the trend of the wage inequality and the metropolitan wage premium in the United States during the 1980s. Two distinct sets of literature documented that the wage inequality between skilled and unskilled workers and the metropolitan wage premium have risen significantly during the decade. When we combine these two sets of evidence and consider the interaction between skill and location, however, the increasing trends of the skill wage gap and the metropolitan wage premium almost disappear. Most of the dynamic changes are picked up by the interaction term, an extra metropolitan wage premium for skill, which rises significantly over the decade. As a partial explanation we find an increasing trend of the skill wage inequality across industries and occupations within metropolitan areas relative to non-metropolitan areas. This finding suggests that the skill biased technology alone may not sufficiently explain the growing wage inequality and it can be interpreted as a metropolitan specific phenomenon to an extent.Wage inequality, Skill premium, Metropolitan areas, globalization

Using panel data to exactly estimate under-reporting by the self-employed

The income of the self-employed is often assumed to be understated in economic statistics. Debate exists about the extent of under-reporting and the resulting measures of the size of the underground economy. This paper refines a method developed by Pissarides and Weber (1989) and uses discrepancies between food shares and reported incomes to estimate under-reporting by the self-employed. In contrast to previous studies our panel data methodology distinguishes income under-reporting from transitory income fluctuations of the self-employed, and provides an exact estimate of the degree of under-reporting rather than just an interval estimate. Using panel data from Korea and Russia we estimate that 38 percent of the income of self-employed households in Korea and 47 percent of the income of Russian self-employed households is not reported

Is the Growing Skill Premium a Purely Metropolitan Issue?

This paper documents that virtually all of the growth in the skilled wage premium over the 1980’s in the United States was confined to metropolitan areas. Explanations for the growth in the skilled wage premium will therefore need to take location into account.Skilled wage premium; Metropolitan areas